The European Central Bank Monetary Policy Committee has decided to keep interest rates on hold at 4.25% after their monthly policy meeting.
And after the meeting, came the caos. The President of the ECB, Jean-Claude Trichet admitted that economic uncertainty remains extraordinary high after the latest effects of the financial market turmoil, and that downside risks risks to economy have outbalanced inflationary pressures.
Although CPI has moderated somewhat, Trichet advances that prices will remain at a high level in tie forthcoming months to moderate gradually through 2009. nevertheless, according to the ECB President, downside risks to economy have increased considerably on the back of weakening economic activity in the Euro Area.
Trichet's comments sent the European currencies way down. The EUR/USD fell down further its lowest close in last 12 months at 1.3744, breaking dynamic support that set alarm bells ringing. The heavy GBP/USD collapsed to 1.7553 support, while the USD/CHF has challenged 1.1410/20 dynamic resistance. The USD/JPY has difficulty in moving up as the the JPY crosses go down.
Tatsuya Kawanishi, junior advisor at FXstreet.com thinks that "European economy itself is not healthy. It might have been a hard decision to hold the rate unchanged at 4.25% under the intensified financial crisis. We have been seeing these turbulent times that we have never experiencend before."
Check the effect that the meeting is having over the pairs in our Rates and Charts Section or compare the movements of the different banks in our World Interest Rates Table.
- ECB homepage
- Read Jean-Claude Trichet's Introductory statement at ECB
- FX Market Readings: ECB decision and press conference - expected moves before and after by Dr. S. Sivaraman
In-Depth Analysis
- European Market Update - Is the ECB in denial or the first of possible October surprises? by TradeTheNews.com
- Mid-Day Forex Technical Report - Euro Dives Further after Trichet, $ Index above 80 by ActionForex.com
- Spot Forex Trades - Trichet - High Volatility by ForexSurvivor
- Gold Investments Market Update - Western Central Banks Curtailing Gold Sales and Other Central Banks Buying Gold by Gold and Silver Investments Limited
Related News
- FXNEWS-ECB to hold rates for rest of year-Economy.com (Thomson Financial News)
- EUR/USD: The Euro dives further on Trichet's speech (FXstreet.com)
- ECB not immune to lower inflation, growth-Solbes (Thomson Financial News)
- EURO GOVT-Bonds rise after Trichet comments (Thomson Financial News)
- FXNEWS-Trichet opens door for rate cuts-Action (Thomson Financial News)
- FXNEWS-Trichet turns less hawkish, euro falls-analyst (Thomson Financial News)
- Inflation risks lower, not disappeared-ECB's Trichet (Thomson Financial News)
- Trichet: Downside risks for economy have increased, upside risks still high (FXstreet.com)
- FOREX-Euro falls as Trichet says lower inflation risks (Thomson Financial News)
- ECB Trichet: Uncertainty High But CPI Risks Declining (Dow Jones)
- HIGHLIGHTS-Trichet comments after ECB leaves rates on hold (Thomson Financial News)
- ECB Trichet: Uncertainty High But CPI Risks Declining (Dow Jones)
- FOREX-Dlr rides up on Senate vote, ECB holds rates (Thomson Financial News)
- ECB holds rates, Trichet's take on turmoil key (Thomson Financial News)
- UPDATE: European Central Bank Leaves Key Rate At 4.25% (Dow Jones)
- ECB leaves interest rates at 4.25 pct as expected (Thomson Financial News
Analysts' comments
- Jean-Claude Trichet, European Central Bank president
"We remain determined to secure price stability in the medium term." - Dow Jone - Dustin Reid, currency strategist at ABN Amro
"Markets are taking his (Trichet) comments as dovish, and that's pulling down the euro." - Dow Jones - Stephen Malyon, currency strategist at Scotia Capital
"What the market has seized on is his comment that upside risks to price stability have diminished. He's (Trichet) becoming somewhat less hawkish or more dovish. The market is taking this as a sign that the rate cuts could be forthcoming." - Reuters
